India's Parliament to investigate 2G scandal

India is appointing a Joint Parliamentary Committee (JPC), consisting of representatives of the government and the opposition, to probe into an alleged scam in the allocation of 2G (second generation) mobile licenses and spectrum in India in 2008.

The irregular allocation of 2G licenses and spectrum at low prices in 2008 to some Indian operators may have cost the country about US$39 billion, the Comptroller and Auditor General of India (CAG) said in a report that was presented in India's Parliament in November.

The demand for a JPC was made by members of the opposition who stayed away from Parliament in protest during a session late last year.

India's Prime Minister, Manmohan Singh said in Parliament on Tuesday that he was asking the speaker of the house to constitute the JPC to avoid a repeat of the boycott by the opposition. The current session of Parliament which started Monday has the country's budget as a key item on the agenda.

The terms of reference and powers of the JPC have not been announced, though the JPC is likely to have some authority over ongoing investigations by the Central Bureau of Investigation (CBI), which is already under the supervision of the country's Supreme Court.

The Department of Telecommunications could have raised more funds if it had opted for an auction, CAG said in its report in November. The department instead decided it would issue licenses on a first come-first serve basis, and sell the licenses and spectrum at 2001 prices, CAG said. The rules of the first come, first serve policy were also changed to favor some companies, it added.

The country's former telecommunications minister A. Raja and key aides in the civil service have been arrested by the CBI, as has Shahid Balwa, vice chairman of Etisalat's Indian joint venture, Etisalat DB Telecom.

Balwa is a promoter of Swan Telecom, which is alleged to have been one of the companies favored in the irregular allotment of licenses. Etisalat acquired a 45 percent stake in Swan which was subsequently renamed Etisalat DB Telecom.

Etisalat said that it was not involved in the controversial license application process, and purchased its stake in the company in the bona fide belief that the licenses had been validly granted. The U.A.E. operator acquired a stake in the joint venture in December 2008 at $900 million which was more than what was paid by the Indian promoters to the government for the licenses less than a year earlier.

Telenor's joint venture in India is also under scrutiny. Heads of key telecom service providers have also been questioned by the CBI, including Anil Ambani of Reliance Communications, the country's second largest operator.

The JPC may be asked to investigate irregularities in allocation of licenses from 2001, as the ruling coalition, United Progressive Alliance, holds that it followed policies in spectrum allocation similar to those of the opposition National Democratic Alliance which was in power until 2004. The Supreme Court has already instructed the CBI to investigate the allocation of licenses from 2001.

The government adopted the auction route last year for the auction of 3G licenses and spectrum.

The investigation has not affected users of mobile services in India, because the government has as yet to decide on terminating the mobile licenses of any of the operators under scrutiny. Recommendations by the Telecom Regulatory Authority of India (TRAI) to charge higher prices for extra spectrum allocated to some operators may however push their costs up in the long term. TRAI's recommendation has not yet been accepted by the government.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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